Ways To Grow

Let's assume you aren't a retail brand looking to add stores. Your growth options are actually quite limited.

You can find new customers. This is necessary, and it is not generally prioritized.

You can get existing customers to spend more. This is hard, it is almost always prioritized, and is often a waste of resources.

You can add product lines and/or create new brands. Non-competing product lines are one of the best ways to grow. If you sell Women's Apparel and you move into Kids, guess what? You'll sell more merchandise. If you sell Women's Apparel and you move into Widgets? That's a lot harder.

You can move into other channels. It's the reason many of you sell on Amazon. They do the hard work, they take a chunk of your profit in kind.

As it becomes harder to find new customers, it becomes necessary to explore new product lines and/or new brands.

What Does The Plan Look Like When Proper Organic Percentages Are Applied?

If I have to hear one more professional lament the fact that Orvis doesn't mail catalogs anymore but Amazon does ... then suggesting that "Amazon is smarter" ... my goodness.

None of that matters. The only thing that matters is your customers, your marketing efforts, and the incremental effectiveness of your marketing efforts. That's it.

Here's what proper application of the "Organic Percentage" looks like. Below is a typical circulation plan (simplified by deciles instead of segments for illustrative purposes) via matchback analytics. Looks good on the surface (only look at the top portion of the table for now).

Every segment is profitable - you could absorb a 10% increase in ad costs and still be profitable. It's all good! Catalogs work.

Except they don't work for most customers.

You're one of the smart ones ... you execute mail/holdout tests. For you, 75% of the demand will happen anyway, 25% is "caused" by catalog marketing. Which leaves you with the bottom half of the table.

Look at that. There are ten deciles/segments there. How many are profitable? One (1). One!! Just the most loyal customers. Every other segment represents a marketing abomination.

In case you are wondering, this is where the arguments begin.

There is the group of professionals who simply do not believe the results. They are true believers in the craft. You cannot convince this audience of anything, even though 80% of the catalog pages circulated 20 years ago no longer exist (because they were terribly ineffective). You have to let these people marinate in their delusion.

There is a group of professionals who have to test 50 times ... they believe that the test results "are not representative". These people are stalling. They know the change that these results will lead to, and they don't want to deal with change. So they delay the inevitable.

There are a small group of professionals who believe the results, but realize their organization is unwilling to change. This audience largely left catalog marketing in the past twenty years, and are now thriving in ecommerce.

There are a small group of professionals who work in paper / printing / agencies. They CANNOT believe these results, because as I was told by a paper rep ... "it will take food off my dinner table, and I cannot allow that to happen". They lie to benefit their craft. They are not fundamentally different than politicians who lie to protect their congressional seat.

There are a small group of professionals who work at agencies AND they believe in the results and they try to do what is best for their clients. If the agency you work with is willing to execute mail/holdout tests and evaluate results via the bottom half of the table (above), hold on to that agency like your life depends upon it.

Then there are the companies who change. Like Nordstrom did back in 2005 when I worked there (they kept mailing branding-centric catalogs throughout, but the classic list-based catalog business model was discountinued). Like Orvis. Like several of my clients. Why are they changing? Because they run a p&l that looks like this.

These companies make a choice. They take the 17% demand hit, but save $360,000 in ad cost and increase profit by $213,000 (in this example). With the ad cost savings, they typically reinvest in digital marketing channels ... or they just become a smaller brand that is more profitable. Either way, they outperform those who don't evaluate their businesses in this manner.

Did you see what happened in the bottom half of the table, when you evaluate your circulation plan via mail/holdout tests?

• Only the most loyal customers are profitable.

This is why you'll see brands with the GDP of Australia be able to mail catalogs ... they have hyper-loyal customers that can afford to be mailed even if little of the demand generated by the catalog is actually incremental.

This is why I argue that catalog marketing will still be a craft that can be applied to loyal customers or hyper-productive customers. The math will continue to work for a period of time.

But for everybody else?

• It's over.
• It's been over for a long time.
• There's no reason to badger Orvis because they made what is in reality an easy, fact-based, profitable decision.

It's Forecast Season!

Somebody at your company sounded the alarm bells about November/December.

Is that person right? Are you going to be below plan/budget? Or is the professional paranoid?

It helps to have facts, doesn't it?

As I generally do each year, I'll accept five years of data through September 30. With that data, I'll tell you what your projections for November/December look like. It's Forecast Season!

Contact me right now (kevinh@minethatdata.com) and I'll project November/December for you at a low cost.

Content Creation

Here's the link.

I realize many of you are stymied by creating content for your customers. Some of you would say the video above is pointless, useless, and may have nominal ROI if any. Think of this as a triangle, with being "stymied" on one point, "pointless" on another, and doing something on the third point of the triangle.

How Will You Give New Items Exposure?

It's hard for the customer to know you have new merchandise unless you tell them you have new merchandise. You do that through print (for some of you), you do that through email marketing, you do that through your home page, you do that via social media.

Now think a bit about the evolution of search. Your search-centric customers already skew to existing items ... just perform the analysis yourself, it's easy to do and it is revealing as heck. Algorithms push customers to items that algorithms know about.

AI likes/needs to be "trained". How do you train an algorithm on an item that you won't offer yet for two more months?

Email marketing is going to become your most important new merchandise advertising platform. It will be one of the few places you have control over the message. Start your experiments today, learn as much as you can, and be ready for the change that is coming.

The Organic Percentage Over Time

When I left Lands' End in 1995, one of the challenges the analytically-focused person faced was the fact that some in Management did not believe that if you didn't mail a catalog 30% of the demand would still happen (from surrounding catalogs). This "fact" (measured via mail/holdout tests) meant that what was marginally profitable was, in fact, unprofitable. Nobody wants to be tied to something that is unprofitable. Consequently, facts were not accepted.

At the time I thought "these people just aren't smart enough to understand simple math". I was wrong. People are smart enough to understand facts, be it in marketing or politics. People choose to ignore facts for perfectly good reasons.

The organic percentage, at 30% in 1996, would become larger, creating ever-bigger problems.

By decade, the organic percentage grew.

• 1996:  30%.
• 2006:  50%.
• 2016:  65%.
• 2026:  80%.

In 2026, the only customers that can be profitably mailed are good or great customers. That's it.

And I get it ... some of you are reading this and you go back to your matchback analytics and you say "I'm good". You run a p&l on each segment and you believe you are mailing 36 month customers profitably. If you believe this, execute the following experiment.

• Assume your organic percentage isn't 80%, assume it is just 50%. Pretend like it is 2006.
• Run a p&l for each segment assuming your organic percentage is an old-school 50%.
• What does the analysis tell you?

It tells you an inconvenient truth.

• If you do what the analysis says, your company will be more profitable. Much more profitable.
• If you do what the analysis says, you will cost your company top-line sales/revenue/demand, and you have forces within your company who will never let you do that.

This is why so many catalog brands ultimately went bankrupt. They couldn't let the top-line contract, so they just kept doing what they were doing until unprofitable became "too unprofitable" while customer response also contracted.

When the AI bubble pops (and it most assuredly will pop), new ecommerce models fueled by what AI is supposed to become will emerge. Print will be forced to be leveraged only by brands with the GDP of Bolivia or will be a tactic to leverage with best customers with high iROAS. It will not be a channel to center an entire business around (and honestly, it hasn't been for 20 years). Also - the same forces that came for catalog marketing will come for old-school ecommerce in a few years. It's how capitalism works.

An Interesting Evaluation Of Marketing Effectiveness

A link was offered to download a "white paper" demonstrating that print has fabulous ROI.

The "good" from the PostPilot report?

• S-Tier Analysis:  Conducted via mail/holdout groups. Yeah, they went there. Kudos!
• They Didn't Lie:  Their results "make sense". They aligned with reality.

The "not so good" that made me #sigh?

• Results derived from highly responsive customers.

You can cover a whole bunch of sins by executing marketing against the most responsive customers. Just ask the loyalty industry for verification. Here is an example of the kind of direction they're leading you in.

There is nothing nefarious happening here - the analysis is measured properly, the organic percentage is common/reasonable, and iROAS (incremental demand / ad spend) is incremental.

Is there a flaw in the analysis?

No.

Is the analysis misleading?

Yes.

Why?

The analysis was executed against highly responsive customers ... ones about to buy or ones who just purchased. In either case, the customer is not representative of the customer base. EVERY marketing effort "is likely" to work when measured against highly responsive customers. Including print. Especially print!

The logic falls apart when you take the same conditions and apply them to, say, a customer who has not purchased in 18 months.

Everything is the same here - same incremental lift, same ad cost, same organic percentage. However, the customer is simply not responsive. As a consequence, the marketing channel is not effective, with a horrifying iROAS and a loss.

That's how you make something appear to be effective - execute it against responsive customers.

But when you try to extend the audience? Not so good.

Email and Social are the ways you speak with non-responsive audiences. Ad costs are so minimal that the numbers work.

You Get This Newsletter Every Saturday, Right?

If you want to see what a mix of professionalism, free information, and personal expression looks like, get on this email subscription (I've been here for more than a decade, long enough to see his kids grow up and move into college and begin careers).

Saturday's email was about the resurgence of brand marketing ... which is interesting because on many recent video conferences there have been robust discussions about the death of catalog marketing and the importance of email marketing as one of the few ways to have an actual "relationship" with a customer.

25 Years

It's almost unfathomable that a full generation has passed since 9/11. Twenty-five years. More than a quarter of the people who experienced that day are no longer with us, including 3 out of 8 of the adults who experienced that day.

Pressure causes people to behave in interesting ways. On 9/11, I recall a peer VP sobbing. An Executive looked at me and said "Why is she so sensitive?". He then locked myself and my Marketing Director in a conference room from 2:30pm - 7:00pm because, as he said, "we'll get an opportunity to fix the business and nobody will be here to bother us". I sent my employees home, then failed to fix the business during the 4.5 hour session. Obviously, the Leader was responding to pressure in a manner inconsistent with logic. It's easy to feel empathy for the Leader today. I felt something different that afternoon.

A woman I've played pickleball with described what it was like to try to get out of the city on 9/11. Her ordeal was obviously more harrowing than a 4.5 hour session in a stale conference room.

It's like the events of that day sent us down a different reality path ... not unlike the one in Back to the Future where our heroes end up in a timeline controlled by Biff Tannen.

No matter what happens, we move forward. We are resilient.

How Do You Know When A Marketing Channel Is Dying?

Last month I was asked this question. What a good question!

In 1999 at Eddie Bauer, I measured "phone" customers ... those who bought by calling our contact center. About 10% of those customers placed an ecommerce order the next time they purchased. Meanwhile, almost no ecommerce customers placed an order using the phone on a next order.

• Run that relationship out a few years and it became obvious that the marketing channel known as catalog marketing was doomed.
• If you didn't look at the data in this fashion (nobody does), it becomes really difficult to see that a marketing channel is dying. By purposely not running the analysis in this way, one can believe forever that the marketing channel is not dying when it is most certainly not dying.

The relationship I described (identified in 1999) ran like a runaway truck from 2003 - 2013.

• About 30% of phone customers placed their next order online.
• Virtually no online customers placed their next order via the phone.

By the time we got to 2013, catalog marketing as a discipline was done. No, not to the NEMOA audience obviously, but to any rational observer it was done. By 2013 the rate of phone customers shifting online in their next order was back in the 10% - 15% range. In other words, all the customers who were going to convert to online buying had already converted to online buying. The only customers left were all 60+ years old (in 2013 - imagine their age today).

This is how marketing channels die. It happened to Spiegel / JCP / Sears / Wards. It happened to specialty catalogs. It's going to happen to ecommerce brands over the next decade once the AI bubble pops and newer AI-centric business models emerge from the rubble.

There is going to be "something". You might implement "something" on your old-school website that causes customers to change their behavior. You might push your customers to an AI-infused marketplace (don't do that for Heaven's sake). You might generate traffic on your site from an AI-infused marketplace and notice that you don't have the same traffic from Google. Regardless, "it" is going to happen.

• You will measure the dynamic.
• If 20% of customers who bought from the old-school channel last year purchase via the new channel this year ... but very few of the new channel customers go back to the old-school channel, you know that a marketing channel is dying.

How many of you measure marketing channels in this manner, show of hands?

Business Isn't Easy

I reviewed all clients who were charter members of my Elite Program back in 2015 ($1,000 per run for existing clients, 3x per year, voluntary performance).

A third of charter members are no longer in business.

All of the brands now out of business were catalog brands.

Other catalog brands were distressed, gobbled up by catalog holding companies.

If you go back to 2007 when I started my consulting work, about 2/3rd of the catalog brands I worked with in my first decade of consulting are gone.

Gone!

No amount of paper / printing / agency discourse changes facts. If you're still here? You did something right!

After the AI bubble pops, there will be new business models. New business models will grow at the expense of existing ecommerce brands. The cycle will repeat. It's unavoidable, it's how capitalism works.

It's also very rewarding to fight against forces working against you ... to persevere, to thrive, to overcome challenges with great merchandise!

Package And A Snack

I ordered a cable (from Bloom Audio) that connects my Qudelix Q5k bluetooth dac/amp to my Apos Gremlin hybrid tube amp (2.5mm balanced to 4.4mm balanced for those nerding out here). It's not exactly the type of solution Walmart or Target tries to solve.

The image below shows what arrived in my package on Thursday.

A thank you note ... and a Starburst fruit chew.

I've told you this story at least a dozen times - I worked with a company that put ghosts in their outgoing package. You received a little note about your ghost, his/her strengths, weaknesses, and potential scenarios where the ghost might influence household activities. On the socials, customers loved this little touch.

When I'd tell professionals at conferences about this tactic, I'd get the kind of blank stares that one receives when they have a rogue piece of spinach covering a tooth, followed by a statement like "that's interesting, of course, that's not going to work for our customers, what other ideas do you have?" And I'd think to myself, "why is it my job to toss ideas out for free, isn't it your job to come up with ideas?"

There's about two months to go ... then many of you become preoccupied with Winning Cyber Monday (#wcm). Until you win by giving 77% off plus free shipping, what can you do with your outgoing packages to help your customers feel special?

Taking Questions

Going into Labor Day weekend, do you any questions for me? Send me an email (kevinh@minethatdata.com) and if I can answer your question, I'll do so.

Otherwise, enjoy your long weekend! See you in several days.

Blaming The User / Customer

Two days ago I received communication from an individual.

• "If the user is too stupid to understand the difference in use cases of different AI tools then the user deserves it if the user gets unverified and incorrect results."

Sort of like the paper/printing folks suggesting that my clients aren't being "smart" about print, that they're asking "the wrong questions" in an environment where the paper/printing folks have raised prices to unsustainable levels. Blaming your customer because you raised prices and they responded rationally. Not a long-term strategy by any stretch of the imagination.

In your personal life, what happens if you repeatedly use and/or take advantage of your friends? You run out of friends!

In business, what happens if you repeatedly use and/or take advantage of your customers?

When The Marketer Is Fighting For Her Company

Here's something I witnessed recently.

• Annual Comp Segment Performance:  -11%.
• Annual New/Reactivated Comp Buyers:  +3%.

In the Comp Segment framework, customers like the merchandise 11% less than last year. This fact has to be applied to new/reactivated comp buyers.

• Adjusted New/Reactivated Comp Buyers = +3% - (-11%) = +14%.

Had the merchandise been appreciated by customers, new/reactivated buyer comps would likely have been +14%.

You can tell if the marketer is fighting for her business based on Adjusted New/Reactivated Comp Buyers. It's not the only way to tell, but it is a leading indicator. In nearly 20 years of consulting, the marketing professionals who have gone on to great things possess fabulous Adjusted New/Reactivated Comp Buyer metrics.

Show of hands ... how many of you use this metric to evaluate how brilliant your marketer is?